Making Tax Digital (MTD) update for VAT registered businesses
A reminder of the key points for Making Tax Digital:
- Applicable for VAT periods that started on or after 1st April 2019
- For many businesses, this will have been the 30th June 2019 return, which should have been filed before 7th August 2019
- Applies to businesses with ‘taxable’ turnover of £85,000 or more
Around 500,000 businesses registered for MTD with HMRC in the month leading up to the deadline, resulting in 90% compliance for those affected by MTD. However there are still around 120,000 businesses which have not complied and are at risk of penalties unless they have a dispensation, which provides an extension of six months to the 1st April deadline.
To qualify for a dispensation, your business must fall into one of the following categories:
- You are part of a VAT group
- You are based overseas
- You are a trust or a not for profit organisation that is not set up as a company
- You use the annual accounting scheme for VAT
Still using spreadsheets?
Businesses using spreadsheets are able to continue to use them to report VAT, providing they are used in conjunction with a solution that can report digitally to HMRC. In practice this means that businesses have been allowed to use ‘bridging software’ solutions, to translate and report their VAT spreadsheets into a digital format that is accepted by HMRC. Call us now about our Alphabridge software solution if you still maintain VAT on a spreadsheet but want to remain within the rules.
What are the penalties?
HMRC promised a ‘soft landing’ in the first year for those businesses affected by the change.
So far no penalties have been applied, but after April 2020, the normal VAT penalty regime will apply, with a cumulative penalty according to the number of defaults in the past twelve months. For those businesses with six or more defaults in the previous six months, the resulting fine could be 15% of the total VAT due. For careless or deliberate inaccuracies, that figure rises to a possible 100% penalty.
If you are concerned that your business may not be compliant with MTD or have missed the deadline to register, it is not too late! Call Roffe Swayne now to find out how we can help.